Many homeowners are asking the question what is a reverse mortgage loan? The reverse mortgage is designed for senior homeowners that are 62 years and older. It is an alternative solution that allows homeowners to tap into their home equity and use the money for medical bills, living expenses, retirement, or to go on a nice vacation. The money is the homeowners and free to use as they wish.
A reverse mortgage is similar to a traditional mortgage in that it is a mortgage loan. The title to the property stays in the homeowner’s name. The homeowner may sell or refinance the property at any time with no prepayment penalties. The difference is that there are no monthly payments with a reverse mortgage. Instead of you paying the monthly interest of the loan the interest is added to the balance each month increasing slightly. The loan becomes due when the home is no longer the primary residence or the home owner passes away.
What are the Benefits of a Reverse Mortgage?
The major benefit of a reverse mortgage is that the senior homeowner gets to stay and live in their home for the remaining of their life if they so choose. The second benefit is there are no monthly mortgage payments like a traditional loan. And the 3rd benefit is that you get to cash in a portion of your home’s equity.
The reverse mortgage is an ideal solution for many senior homeowners. Many seniors in this day in age simply do not have any retirement savings. Many are forced to work to try and make ends meet. Unfortunately, there will be a time when they simply will not be able to work anymore and social security is not enough. There are very few options for seniors. Fortunately, there is the reverse loan option. Senior homeowners 62 and over might consider the reverse mortgage as a nice financial solution.
Reverse Mortgage Pros and Cons
When considering a reverse home loan there are both pros and cons. The reverse mortgage may not be the right fit for everyone. Let’s take a look at some of the reverse mortgage disadvantages first.
Reverse Mortgage Disadvantages
- A Reverse loan will reduce the amount of equity in your home. If you are thinking of passing the home down to your family this could be a problem.
- A Reverse loan requires the borrower to maintain the home as their primary residence.
- The borrower must be 62 or older to qualify.
- The Origination fees can be much higher for a reverse mortgage.
Reverse Mortgage Advantages
- Guaranteed source of income to help you retire with less stress
- The borrower is able to take the money in monthly payments, a line of credit or a lump sum.
- The reverse mortgage gives you the ability to stay in your own home for as long as the borrower may choose.
Reverse Mortgage Qualifications and Requirements
The qualifications and requirements for a reverse home loan have undergone a few changes. The new guidelines take a closer look at income, assets and the borrower’s credit payment history. The reason they do this is to make sure the borrower is able to pay things like the taxes and insurance on the home. If a borrower has a poor payment credit history. The borrower might be forced to set a portion of the money aside to pay the taxes and insurance.
Another requirement is the borrower must go through counseling. The borrower is required to speak with a HUD-approved counselor. After completion of the counseling session, the borrower has rewarded a certificate of completion that I am presented to the lender. The primary reason for this counseling session is to educate the borrower about the loan and allow them to ask the question in a neutral environment without the loan originator. Normally these counseling sessions are very helpful and informative for the borrower.
If you have a question or would like to learn more about this loan option. Call (855) 667-9290 to speak with a reverse mortgage loan specialist.